For the 2.5 million Californians who buy their own health insurance, the 6.6 million who are uninsured and the million-plus who get their insurance through their jobs at the state’s smallest businesses, finding a good health plan is a daunting task.

Just comparing plans can be confusing. Finding the right plan that’s also affordable can be even tougher.

That may be changing.

Health care exchange

What it is: One of the fundamental elements of federal health care reform. By 2014, each state will create an exchange where individuals and small businesses can buy health insurance. California is the first state to pass legislation creating its California Health Benefit Exchange. Gov. Arnold Schwarzenegger signed the legislation on Sept. 30, which gives the state three years to organize the program before it launches in January 2014.

How it works: The idea is that individuals and small businesses would join a massive pool of consumers, increasing the exchange’s ability to negotiate a lower group insurance rate for them.

Getting a tax credit: The exchange provides an immediate tax credit for low- and middle-income individuals and families. Households earning 133 percent to 400 percent of the federal poverty rate will be eligible for a credit to help offset the cost of coverage. Depending on income, qualifying households would pay no more than 2 percent to 9.5 percent of household income on health insurance.

What you get: Consumers choose between four levels of insurance — bronze, silver, gold, premium — plus catastrophic coverage available for people younger than 30.

Bronze: Lowest premium cost. Covers 60 percent of benefit costs.

Silver: Covers 70 percent of benefit costs.

Gold: Covers 80 percent of benefit costs.

Platinum: Highest premium cost. Covers 90 percent of benefit costs.

Catastrophic: High deductible and low premium cost, available in the individual market only for people younger than 30. Also pays for three primary care visits.

Last month, California became the first state to pass legislation establishing a health insurance exchange as part of federal health care reform, which requires most Americans to have coverage by 2014 or pay a fine.

The California Health Benefit Exchange will provide a place for small businesses and people without employer-based insurance to join together to buy health insurance at lower rates, aided by federal subsidies to low- and middle-income consumers.

Every state is required by the federal law to create an exchange that will begin operating in 2014.

“This is a revolutionary change from the current health care system in California,” said Anthony Wright, executive director of Health Access California, a nonprofit consumer group.

“Right now, individuals and small businesses are at the mercy of insurers. This allows the exchange to negotiate on their behalf for the best price and value.”

The idea for the exchange is that millions of people who now pay top dollar for insurance because they’re buying individually or in small groups — or forgoing coverage because of cost — will benefit from the exchange’s bulk purchasing power to get a better price. The exchange also is charged with making it easier for consumers to compare plans and choose what works best for them.

Created as an independent government agency, the California Health Benefit Exchange is led by a five-member board that will be appointed by the governor and Legislature early next year.

The legislation establishing the exchange was opposed by the California Chamber of Commerce and some insurance companies that said it would limit customer choice.

Patrick Johnston, chief executive of California Association of Health Plans, said his group believes "the creation of an exchange is a good mechanism for consumers to get health coverage, particularly those who have not had insurance."

The new law raises questions, however, he added.

“One question is whether all qualified plans will be in the exchange marketplace for consumers to consider or whether the exchange will severely limit what plans are available.”

Johnston said the exchange's "selective contracting" power could exclude smaller regional plans such as Sharp HealthCare in San Diego.

Chamber spokeswoman Marti Fisher wrote in an August letter to lawmakers, “A five-member board with unrestrained authority and without oversight is not in the best interest of the people of California.”

Although the exchange won’t start serving consumers until 2014, experts say there’s no time to waste in getting organized.

“The lead time California has is adequate but not overly generous,” said Jon Kingsdale.

Kingsdale knows the challenges of building an exchange from the ground up — he was the founding executive director of the Massachusetts agency created in 2006 to administer that state’s universal health care law, which has been a model for the federal reforms.

His advice to California: get moving quickly, figure out the marketplace and go on the road with a statewide campaign to “communicate, communicate, communicate” with the public.

“There’s a lot of interest and anxiety about health reform in California and across the country,” said Kingsdale, who left the Massachusetts Health Connector in June to work as a consultant.

“Without a lot of communication, there’s a potential for misinformation and more anxiety. There also is a big opportunity to get out accurate information about the California Health Benefit Exchange and how it will work.”

How the state exchanges work is set out in the federal Patient Protection and Affordable Care Act that became law in March. The law specifies that people with a household income between 133 percent and 400 percent of the poverty rate will get an immediate tax credit to help offset the cost of insurance. Depending on income, people would pay no more than 2 percent to 9.5 percent of their income on health insurance.

(People with incomes below 133 percent of the poverty rate will be eligible for Medi-Cal under an expanded federally funded program.)

A study by the nonprofit Families USA estimated that 28.6 million Americans, including nearly 3.5 million Californians, would be eligible for the tax credits in 2014. An additional 2 million Californians are expected to buy insurance through the exchange without a subsidy, because it will offer easy comparison shopping, said state Health and Human Services Secretary Kim Belshe.

Getting a tax credit

Example 1: A single person earning 133 percent of the federal poverty level ($14,400) who pays more than 2 percent of her annual income on health insurance ($288). She qualifies for a tax credit.

Let’s say she chooses the silver level of coverage with an annual premium of $3,000 in her Zip code. She pays $288 and gets a credit of $2,712.

Example 2: A family of 4 earning 200 percent of the poverty level ($44,100) who pays more than 6.3 percent of their annual household income on health insurance ($2,778). They qualify for a tax credit.

They choose the silver level of coverage with an annual premium for a family of $4,500 in their Zip code. They pay $2,778 and get a credit of $1,722.

Still, “there are a lot of important unanswered questions,” Belshe said. Among them: Will individuals and small business owners buy coverage or opt, instead, to pay a fine?

“It’s really important that we work together across all sectors … to underscore the value of coverage,” she said.

Last month, the U.S. Department of Health and Human Services announced $49 million in grants to help states set up the exchanges. California was awarded $1 million, and more funding is expected in the spring, Belshe said.

Once the exchanges are operating in 2014, they are required to be self-supporting. California’s exchange is prohibited from using general fund money to help pay for the program.

Instead, administrative costs will come from insurance premiums.

The state Legislative Analyst’s Office said in August that it couldn’t calculate administrative costs because the agency hasn’t been created but estimated they would be “tens of millions of dollars.”

The analyst’s office noted that administrative costs account for about 3 percent of the cost of insurance premiums in the Massachusetts exchange.

When Massachusetts launched its program in 2006, about 9 percent of residents were uninsured. Today, that’s down to 2.6 percent, according to state officials.

Kingsdale said the Massachusetts exchange began offering both subsidized and unsubsidized insurance just six months after legislation established his agency. Programs continue to be added.

“I like to say we were laying the tracks and running the trains at the same time,” he said.

Kingsdale said the California Health Benefit Exchange board and its new staff must quickly assess the needs of its customers, both subsidized and unsubsidized, and the health plans it will market.

For it to succeed, the exchange must become the simplest and best place to get insurance, he said.

“We found customers wanted more standardization between carriers so they could compare apples to apples,” Kingsdale said. “But that can quash innovation” among plans.

It’s a balancing act between consumer concerns and creativity in health plans, he said. “We found that to be a challenge in Massachusetts and I think that will be a challenge in all of the states.”

Another challenge was resistance by small employers in offering their workers a choice of health plans, rather than just one, Kingsdale said.

“A choice requires new ways of pricing plans, and that remains a challenge,” he said. “How the California Health Benefit Exchange sees its role in offering health care to small employers will be interesting.”